XU Magazine - Issue 13

Spellcheck your bookkeeping: Reviewing your clients’ accounting records


Year-end accounts work makes the largest contribution to the income of most accountancy practices. It is also the foundation from which additional services can be offered to clients – both complimentary compliance services and added-value advisory services…

So, it’s never been more important for accountants to secure their compliance work into the future. However, with compliance fees static or falling, year-end accounts work must be managed ever more efficiently. The process is always the same – review, analyse and correct – but how you go about this work will determine whether this year-end job is profitable or not. Productivity gains are the price of staying in the game.

Bookkeeping software ensures that accounting records are balanced (we have the magic of double-entry to thank for that) but, as we all know too well, balanced does not always mean accurate, or even reasonable. If errors crept into the space between chair and keyboard, how can Xero (or any accounting software) know what you meant to do?

As a bookkeeper, at the end of the year you want to wrap up a tidy set of books and, as an accountant, you want your year-end jobs in and out as quickly as possible. In both cases there is the need to review the numbers to make sure they can be relied upon and reported on. Obvious howlers are usually easy to spot, but the accumulated effects of smaller problems, replicated over thousands of individual transactions, are truly the “devil in the detail”.

Whatever your approach to analysis, whether using client software, exporting to excel or using a reporting/analysis tool the review process involves looking for the same issues and trying to make sure that you are consistent in how your staff review all your clients.


Completeness of your entries

Checking recurring transactions such as utility bills, mobile phone payments or loan repayments, year-end software can keep track of the number of transactions enabling you to identify missing items or make appropriate accruals and prepayments.

Consistency of your postings

No matter how you have customised your chart of accounts, what is important is the repeatability of how you post particular transactions. Some suppliers like Amazon are so universal it’s hard to easily check they have been recorded correctly, but for most other suppliers each of their invoices should follow a distinct pattern. So, if you find 5 invoices posted to one account and one is posted elsewhere, then alarms may need to start ringing. Year-end software can run this analysis quickly and produce an exceptions report.

Fixed asset checks

Small transactions posted to asset accounts don’t make much sense and large transactions in profit and loss accounts should be reviewed to see if they should be reclassified as capital expenditure. With year-end software, every transaction is reviewed and transactions that are unexpectedly low or high are easily identified.

Credits and debits

Rent is rent is rent, well it is except when a rent receivable and a rent payable get confused and get entered incorrectly. Hopefully double entry has made sure the direction of funds flow is correct but a rent receivable balance that is understated because of a misposting of rent payable distorts the picture in your financial reports. Year-end software will highlight these issues easily.

Tax and VAT/GST compliance

The tax authorities are very specific about what types of expenditure can be deducted for tax purposes and when VAT/GST can be reclaimed. References to “entertaining”, “personal” or “penalty” in the description all might be a clue about the appropriate tax and VAT/GST treatment. It’s usually commercially unviable to check every transaction but with year-end software this task can be completed effortlessly.

Like most add-ons year-end software can be tried for free, so why not take your clients financial records and see whether software can help you make year-end compliance profitable again.

Finding needles in your haystack

Filtering views, find and recode, and good solid legwork eyeballing transactions is all it takes but can you really justify the time. No matter how much of an excel guru you are with formulae and ‘if’ statements, checking transactions and balances is extremely time consuming. If it’s all too much you could try some software designed specifically to seek out all these issues.

Computers were designed to analyse patterns and compare data against rule sets. Humans knew computers were better at this and so programmed them to do it much more quickly and repeatably. So, whilst Xero can’t double guess how you intended to any transaction, at least one of the add-ons for Xero can help you identify potential issues quickly and cost-effectively

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About the author

Rob Furness, Director, Ledgerscope Limited

Ledgerscope is the cloud software company behind the popular Movemybooks, Checkmybooks and Backupmybooks services. Checkmybooks is the affordable accounting year-end review tool.